Abstract
This paper estimates a general equilibrium model of school quality and household residential and school choice for economies with multiple public school districts and private (religious and nonsectarian) schools. The estimates, obtained through full-solution methods, are used to simulate two large-scale private school voucher programs in the Chicago metropolitan area: universal vouchers and vouchers restricted to nonsectarian schools. In the simulations, both programs increase private school enrollment and affect household residential choice. Under nonsectarian vouchers, however, private school enrollment expands less than under universal vouchers, and religious school enrollment declines for large nonsectarian vouchers. Fewer households benefit from nonsectarian vouchers. (JEL H75, I21, I22)
Highlights
I first explain the algorithm used to compute the benchmark and voucher equilibria, and discuss specific aspects related to the treatment of household location and school choice
Chart I depicts the algorithm that calculates an equilibrium
The computation of the benchmark equilibrium for the Chicago metropolitan area takes between five and ten seconds in a 3Ghz processor, and the computation of the voucher equilibrium for vouchers ranging from $1,000 to $7,000 takes between one and seven hours depending on the voucher program and amount
Summary
I first explain the algorithm used to compute the benchmark and voucher equilibria, and discuss specific aspects related to the treatment of household location and school choice. The computation of an equilibrium consists of two nested loops: an outer loop of major iterations for voting and adjustment of community compositions and school quality, and an inner loop of minor iterations for the choice of location and school type. 1. For the benchmark equilibrium, set up the community structure for the computational version of the model, and define initial prices for houses and non-residential property in all locations.
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